[CLC-Discussion] Project Cross-Collateralization: Hypothetical question to CLC Members

[Bruce Partington]

In my opinion, the answer is no.


1.       The question is what is "due" for such labor, services, or materials, since the statute specifically authorizes withholding "in accordance with the terms of a contract." If the contract authorizes withholding for amounts due on another project, then what is left after the withholding is what is "due" for "such services, labor, or materials." Most such provisions in contracts are written around what is "due" and when it is "due."



2.       Another reading is that the "such services, labor, or materials" modifies only the "bona fide dispute regarding the amount due" and not the other basis of withholding authorized in the statute since they are framed disjunctively-withholding any payment or part of a payment in accordance with the terms of a contract for services, labor, or materials, OR pursuant to a bona fide dispute regarding the amount due.


3.       Another reading is to assume that "such services, labor, or materials" DOES apply to the first part, so you could re-write it like this, which would permit the withholding: "from withholding any payment, or any part of a payment, in accordance with terms of a contract for services, labor, or materials, for such services, labor or materials."


I don't know how one could read "regarding the amount due" to apply to anything other than the second part-"pursuant to a bona fide dispute regarding the amount due" - there are no commas or conjunctions or any other indicators to make it applicable to the first part.

Then there are the common law doctrines of setoff and recoupment which would also apply.

Bruce D. Partington
Clark, Partington, Hart, Larry
Bond & Stackhouse
bpartington at cphlaw.com<mailto:bpartington at cphlaw.com>
Direct: 850-432-1399
Fax: 850-432-7340
*Board Certified in Construction Law

From: clc-discussion-bounces at lists.flabarrpptl.org [mailto:clc-discussion-bounces at lists.flabarrpptl.org] On Behalf Of Arnold Tritt
Sent: Thursday, October 29, 2015 1:35 PM
To: clc-discussion at lists.flabarrpptl.org
Subject: [CLC-Discussion] Project Cross-Collateralization: Hypothetical question to CLC Members

Gang:  I have a situation where a large, national multi-family GC is attempting to set-off monies owed to a MEP Subcontractor on Project A, which was satisfactorily completed, against back-charges stemming from an unrelated project, Project B, in which the Subcontractor was allegedly in default.  Both jobs were private projects. Different owners.  Different counties in Florida.  Assume that Project A's subcontract authorizes set-off based upon claims for other, unrelated projects.

Fla. Stat. §713.345(1)(a) makes the misapplication of construction funds a felony.  In addition, the statute limits bona fide disputes to a "dispute regarding the amount due, if any, for such services, labor, or materials" (emphasis added). Attached is a cool article by Frank Pohl who argues that "such" services, labor, or materials is intended to mean services, labor, or materials furnished on that project only, and not on other, unrelated projects.

Thus, isn't the enforcement of the cross collateralization provision by the GC in the above fact pattern a felony? Any guidance would be greatly appreciated.   Thanks, Arnie.

Arnold D. Tritt, Jr.
Board Certified Construction Attorney
[TrittAssociates_Logo_CMYK]
707 Peninsular Place
Jacksonville, Florida 32204

Phone (904) 354-5200
Facsimile (904) 354-5256
Arnold.Tritt at atritt.com <mailto:%5Be-mail%5D>
www.atritt.com<http://www.atritt.com/>

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